Alibaba – a journey to the West

Alibaba, a fictional character in the famous Arabian Nights tales, happens to also be the name of the most successful e-commerce company in China – which just announced its planned IPO in the US.

The US financial media did not take this lightly, with Bloomberg running a two-hour, non-stop analysis from 5am China time today. Seldom have I seen a company get so much attention on Bloomberg, and I believe this says something.

That something is not just the share size of this IPO, which could be the largest ever in history. With the arrival of Alibaba, Western investors, media and analysts are facing something unfamiliar to them — a Chinese company that has a unique sales model based on the needs of world’s largest market. They also offer a selling proposition that fits Chinese audiences, as well as a governance system that is deeply rooted in Chinese customs and ways of thinking – something that the West is not accustomed to.

Looking in from a Chinese perspective, I believe the three notions above, coupled with the fact that it is a strong money making machine (it has a 58% net profit), will allow Alibaba to slowly redefine the rules of e-commerce worldwide, just as they did by establishing a “trust” system in China via Alipay (its online payment system that promotes trust and credit in a society that was once upon a time not too long ago foreign to these concepts).

What this means is that investors cannot continue using traditional, Western ways to analyse the situation. Instead, they need to try to understand the whole scheme from a different, dare I say, Chinese perspective, and this will surely prove to be challenging and unfamiliar for many.

On the flip side, I don’t forsee it being just smooth sailing for Alibaba — even with those impressive financial figures.

The company will need to do a better job in communicating with the West – clarity and transparency will be key in order to earn investor trust, as unfortunately anything labeled “China” today seems to come hand in hand with an image of being less than trustworthy.

Yet with what Alibaba has done to revolutionise the e-commerce ecosystem in China so far, I wouldn’t be surprised if they manage to successfully position themselves as a role model for other Chinese companies, particularly those that need to step up their game in communicating overseas. This alone makes Alibaba’s journey one to stay tuned into.

Lydia Lee is head of the emergent China practice and senior vice president & chief strategist, China, at Weber Shandwick.

This story was first published on Weber Shandwick’s own site.

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